By Ken Rutsky

BlueprintS:Bridgingto SaaS SucceSS

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stablished and new ISVs, telcos, hosters and other tech provid-ers are launching Software-as-a-Service at an ever-increasing

pace. That’s great. However, many of these initiatives fail to attract leads and customers in the volume expected, resulting in management, market and shareholder disap-pointment. Why?

How iSVS can tranSformSaaS mindSet,

organization and go to market tacticS

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While organizations spend a lot of time understand-ing the technical transformation required to build a SaaS service, they fail to understand that this is just the anchorage of the transitional bridging they must do. In order to gain share and revenues, they must deal with the remaining pieces of the bridge to service success, which are their mindset, their or-ganizational structure and their go-to-market tac-tics. Let’s take a look at a basic blueprint for bridg-ing to commercial SaaS success:

Mindset – P-2-S

Product to Service. Services require a mindset of continuous relationship management, not of spiky product delivery and transactions. Changing your organizational mindset is the first and foremost step to SaaS success.

Organization – L-2-C

Linear to Circular. Today’s ISV structure is built to de-liver products in a build-and-sell mindset. Even orga-nizations that have adopted Agile SW development paradigms still go to the rhythm of minor and major releases, quarterly sales cycles, and other tradition-al techniques leading to an initial sale to a renewal. These are all linear processes. Successful service or-ganizations are circular, surrounding the customer with experience, support and delivery from the time of first contact onward.

Go-To-Market Tactics – E-2-E

Evaluation to Experience. Today’s go-to-market mix, pricing, channel and promotion is built to drive evaluation and transaction. Successful service go-to-market requires a shift to tactics that drive expe-rience and satisfaction. Successful SaaS organiza-tions shift their go-to-market tactics and investments and become experience and service marketers, not evaluation and product marketers.

Are you firing and forgetting or bridging?

If you know where you’re going but fire away with-out preparation and work, you are at grave risk. Even SaaS start-ups can fall into the trap when they build their organization and tactics with people who have not transitioned to this new world them-selves. Firing and forgetting leads to poor execution and results. So start today by looking to see if you have bridged to a SaaS world or have fired away without changing your mindset, organization and go-to-market tactics.

mindSet matterS moStMindset is made up of three things: orientation, per-spective and focus. In order to make this transition, we must get all three of these in alignment.

First and foremost, we must shift our orientation from product to service. Products, even software prod-ucts, are tangible things to be purchased, installed and used. Services are experienced. This funda-mental shift ripples through everything else we need to do to succeed with SaaS. Maybe your product managers should change their name to service managers. AOL, with its many flaws, had this right with its maniacal focus on “The Service.” The words had an almost mystical quality and permeated their mindset and actions.

Second, we must shift our perspective from spiky to continuous. Products are built, shipped and sold as discrete widgets, which leads release sched-ules, sales quotas and customer relationships that are “spiky” by their very nature. Services are always running (hopefully), and always under evaluation and subject to churn. Customers make a continu-ous buying decision, and their ongoing experience drives long-term value. With the recent April 2011 Amazon outage, the providers who understood this went the extra yard to be ready to drive continu-ous delivery despite Amazon’s challenges. A great example of the right mindset driving the right invest-ment.

Third and last, we must change our focus from transaction to relationship. Great product compa-nies have always understood this, good ones not always. There is no missing this continuous mindset with SaaS. It’s a must-have. In the enterprise soft-ware world, transaction is king. Large investments create economic, organizational and personal commitment to past decisions well beyond healthy levels.

Buyers love SaaS because it raises the bar on pro-viders to deliver real service levels, and lowers both real and perceived switching costs. There are plen-ty of Amazon customers looking today at alterna-tive service providers. The providers who choose to compete for mature and enterprise customers need to raise their relationship game significantly.

How does your organization’s mindset stack up for SaaS success? What action plan do you have to get a service orientation, perspective and focus to permeate from development to marketing to sales and support?

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It’s linear, with sporadic customer contact. The product mindset is spiky spikey and transaction- oriented, and the organization’s linear structure is perfect to support this mindset.

But, as we move from a product to a services model and mindset, the organization must reflect the continuous and relationship- oriented mind-set we’ve adopted.

The organization must be circular, sur-rounding the customer, and must look like this diagram to the right.

Because services are about experi-ence, to truly optimize our experi-ence delivery, we must collapse our organizations and surround the customer. Sales and Marketing, Development and Operations, and Support and Delivery must function as a tightly knit ecosystem, continuously enveloping the cus-tomer in the highest quality service delivery possible.

This is a hard transition to make. It requires executive commitment and drive, and constant attention. However, market leaders must do this, or they will fundamentally remain

Surround tHe cuStomerOnce I have adopting a SaaS Mindset, the next thing I need to do is to change my the organizational ap-proach from linear to circular.

Today’s organization and its interaction with customers looks like this:

Product Management

Engineering& Production

ProductMarketing

DemandGeneration

Sales &Fulfullment Support

a product company, which is the kiss of death for any SaaS provider. Marc Benioff was wrong when he said the “End of Software.” He should have said the “End of Products.”

are You experienced?Once we have shifted our mindset from product to service and our organization from linear to circular, we must now bridge our go-to-market strategy, ob-jectives and tactics from Evaluation to Experience.

Today’s customers have little patience for white pa-pers, datasheets, detailed feature function product specs and the like. They may attend a webinar, but

the next step is experi-ence. Even for large organiza-

tions with complex buying behavior, the expec-tation of SaaS is easy, accessible and meaningful experience of the service, either through demon-stration instances, trial or freemium models.

In a post in November 2010 titled, “Meet the New Enterprise Customer, He’s a Lot Like the Old En-terprise Customer” , Ben Horowitz of Andreessen Horowitz concluded:

“If you are selling to consumers or companies that be-have like consumers, then moving away from the old channel models may make perfect sense. However, if you plan to sell to a large enterprise, keep in mind that the new boss is the same as the old boss.”

Dev

. & O

ps. Support & D

elivery

Sales & Marketin

g

Customers

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And while Ben’s point on having to manage a buy-ing process is spot-on, others have bandied about this post as evidence that we should cling to the old enterprise sales and marketing model. This interpre-tation is just wrong. It ignores the fundamental shift from product to service.

Services are evaluated via experience, not spec sheets, RFPs and lab evaluation. SaaS providers who replicate and cling to today’s software Go To Mar-ket model are doomed to LONG sales cycles and MISSED opportunity.

One infrastructure ISV that launched its SaaS offer-ing experienced this firsthand. Initially, the company continued its sales and marketing model of stringent business and lead qualification before trial approval. For every 100 trial requests, fewer than 10 were ap-proved, with an average qualification period of two months. This stringent qualification gave the compa-ny a close rate of about 2 in 100 trial requests, as 20% of trials closed.

When the group experimented with a much loos-ened qualification, where about 30 percent of the 100 requests were granted in an average of two weeks, an amazing thing happened. The conversion rate per 100 request shot up from 2 to 6, an incredible result, meaning the “less qualified” leads that experi-enced the product actually converted at the same rate as the previous model. This means that for every 100 leads in the old model, the company throwing away four deals! Not only that, the sales cycle short-ened and the company is now leveraging its SaaS trials to sell its on-premise solutions as well.

The mindset and tactical shift from Evaluation to Ex-perience marketing and selling can pay off like this in any market segment. However, to reap the full benefits and scale of a SaaS model, providers must take a long, hard look at all pieces of the marketing mix, from pricing, to channel, to promotion and mes-saging, to competition and company organization.

SummarY: Bridging to SucceSSThis brings us full circle to our blueprint for success. In order to be a successful SaaS provider, organizations must not only build a great service, but they must bridge their:

• Mindset from Product to Service• Organization from Linear to Circular• Go to market strategy and tactics from Evaluation

to Experience.

With that, the Bridge to SaaS Success can generate revenues, share and valuation that meets and ex-ceeds our most aggressive goals.

additional reSourceS• To learn more about Ken Rutsky, please click here

or visit http://bit.ly/k65bmg.